Cleaning Up Reimbursement Claims?

A married couple in Texas has three estates:  The community estate, the husband's separate estate, and the wife's separate estate.  For many years, when one of the estates has contributed to another, a "reimbursement" claim could arise upon divorce.

The caselaw repeatedly demonstrates two classes of examples:

  • One of the estates might have paid debts for one of the other estates.  For example, a separate estate might have paid the mortgage on the marital residence, leading to a reimbursement claim by that separate estate against the community estate.
  • The community estate is entitled to the time, toil, talent and effort of each spouse.  A spouse may spend no more of that time, toil, talent and effort on his or her separate estate than that necessary to maintain and preserve it.  If the spouse spends more, then the community estate might have a reimbursement claim against that separate estate.

Caselaw includes many arcane rules about how to prove a reimbursement claim.  To make things more complicated, in 1999 the Texas legislature renamed the first class of reimbursement "financial contribution" and enacted complex rules for that class of reimbursement.

The new rules were so complex that nobody understood them, so the legislature amended the statute again in 2001.  "Financial contribution" became "economic contribution."  The rules changed, too, but they remained complex.

Apparently family law attorneys have had enough of economic contribution, which brings us to the true subject of this post.  Identical bills have been introduced into the Texas House (HB 2565) and Texas Senate (SB 866) to do away with economic contribution.  In a recent email, the Texas Family Law Foundation described what the bill would do:

Repeals “economic contribution” and replaces it with traditional reimbursement and offset principles, authorizes attorneys fees to be awarded directly to the parties’ lawyers in certain actions to enforce divisions of marital property and fixes a defective statutory formula for dividing options and restricted stock.

For the record, here's one lawyer who would love to see economic contribution disappear back into reimbursement law where it used to be found.